How to Evaluate a MLM Company: Find the Right Company to Join

Today, I want to teach you how to find the right MLM Company.  I’m going to share 12 tips you can follow to evaluate ANY network marketing company and see if it is a good fit for you.

To be quite frank with you, I’m tired of seeing people fail in our industry. I’m tired of seeing people jump from company to company every two to four months. I’m tired of seeing people have unrealistic expectations of their business, only to fizzle out of the network marketing industry just as quick as they come into the industry.  And I’m tired of seeing our industry get a bad reputation.

I believe that finding the right MLM Company won’t make you rich or successful. Ultimately, you are the most important part of the success equation. You can succeed or you can fail in any network marketing company.  Every company has people succeeding and people failing.

However, working with the right company is going to make your life a lot easier, it’s going to make life more enjoyable, and you’re probably going to get much better results in your business.

How to Evaluate a MLM Company

The 12 areas covered below are what I consider the must haves. Of course, your opinion may differ than mine, and that’s perfectly fine. I want to go over each one of these 12 areas and give you some insights of what things you should look for in a network marketing company. Let’s get started.

# 1: The Products

The first thing to look for in a company is the products. Very few distributors will ever talk about this concept. Most people are so hyped up about getting rich quick and about making all this money that they forget to talk about the products. All they talk about is the opportunity.  When you’re evaluating different companies, the product line is the most important thing as I see it. The products are the business.

There are a few things you need to look for with the products.

First and foremost, is there a REAL demand for the products? Are people in the marketplace already using the product or a similar product? Are they accustomed to buying it? If there’s a very small demand for your product, or a very small amount of potential customers, that’s going to make life very difficult for you. You want something that has a massive demand that most people will use.

You want a commodity product, not a luxury product.  If you promote a luxury product, people won’t keep reordering every month (highly unlikely anyway).

It will be very difficult to sell a product that only five to twenty percent of the population will ever use.  You want something that at least fifty percent of the population will use, something for the masses.  Several examples might include shampoos, perfume, health products, personal care items, food products, vitamins, weight loss products, phone services, etc.

The next thing you want to look for in your product is it needs to be consumable OR used up every month. It needs to be something that basically gets ordered, used up within a month or two, and then reordered the following month or a couple of months later. You need to have something that’s consumable so you can get repeat orders.

If your product is a one-time sale, it will be difficult to get repeat orders from your customers and distributors.  If your product isn’t consumable, you will have to keep finding new customers!  If your product isn’t consumable and used up, you want to make sure the company has a VARIETY of different products to choose from, so there is something people could potentially order every month.

Next, the product has to be priced right.  Let’s face it, we are in a crappy economy, and most people cannot afford to spend a $100 for a weight loss shake or $90 for a multivitamin, or $80 for some magical juice from a third-world country. People are on a BUDGET.  You have to have a product at a good price point that MOST people can afford. What I’d look for is a company with prices middle class Americans can afford.

Now, some people would disagree with my point about pricing. However, if the masses can’t afford your product, it’s going to be very difficult to sell it to people. If people can go to Wal-Mart or a similar store and get a competitor’s product that’s similar to yours for 90% cheaper than what you’re selling yours for, it’s going to make it very difficult to find customers in your business. Just remember, your products are your real business.

It also helps if you are passionate about the products. You don’t have to be overly passionate about them, but you have to at least like and use the products yourself. You want to have some enthusiasm for the products.  This will make it a lot easier to sell the products to people.  If you aren’t willing to use the products, or don’t like them, people will sense that and they won’t buy from you (and rightfully so).

# 2: The Company’s Track Record

The next thing that I look for in a company is the track record of the company. I truly believe that joining a startup company is a big mistake. Now, I realize that all network marketing companies were a startup company at one point or another. Ideally, you want to work with a company in our industry that has a proven track record, it’s been around for at least five to ten years, and the longer it’s been around the better.

The reason I say that is if the company has been around a long time, number one, it shows you that the company is stable, and number two it’s worked out most of the kinks. Now, a lot of new companies go through financial troubles, they go through leadership challenges, they have difficulty shipping their product on time, and even pay their distributors late.  However, the established companies have already proven themselves and are STABLE. They have systems and processes in place, and they’re just a great company to work with.

Look for a company with a GOOD track record. The longer the track record they have, the better. If their company has been around 10, 20, even 50 or more years, that is much better than working with a brand new company.

Remember this, you want a company that will be around for another 30, 50, or even 100 years.  You don’t want to build a large team only to have the company go defunct or bankrupt a few years from now.  Of course, there is no guarantee that any company will be around for a long time.  But if they already have a proven track record, there is a good chance they are stable and will keep growing in the future.

# 3: The Company’s Reputation   

The next thing to look for in a company is the reputation. Now, I know our industry in general doesn’t have the greatest reputation, but if you can go to Google or Bing or one of the search engines, and you type in the name of your company plus the word ‘Scam’ and there are millions and millions and millions of pages about your company being a scam, it’s probably the wrong company to work with.

You have to realize that your prospects are going to do an internet search for your company with the word ‘Scam’ or something similar to that, prior to joining. They’re going to do their due diligence (and rightfully so). If all they can find is negative stuff about your company, there’s a good chance they won’t partner up with you.

I understand that all companies, even Wal-Mart, The Postal Service, McDonald’s and many other non-network marketing companies have some negative stuff on the internet. That’s inevitable. That’s fine.  But, if the internet is saturated with negative stuff about your company, and there is more negative stuff than positive stuff, it’s probably the wrong company to work with.

In addition to doing your online research, here is another thing I suggest.  Find three companies that potentially interest you.  Once you do that, ask 50 strangers and friends what they think about those three companies.  If you say the names of the companies and people say “scam” or “pyramid” it’s the wrong company to work with!

# 4: Training and Resources 

The next thing to look for in a MLM Company is the training and resources. You want to do a little bit of digging, and you want to find out what type of training tools and resources the company offers. What are their catalogs like? Do they offer business cards? Do they have a company call? Do they do webinars? Do they have training tools that are available for free or available for purchase?

If the company itself doesn’t have a lot of training tools and resources, does the upline or your sponsor have some type of system or a training call, or resource or business tool that you can use to build your business? You have to realize that tools are very important in your business. A carpenter has their tools, a mechanic has their tools, and you can’t build a house without a hammer, nails and a saw.  You’re not going to be able to build your network marketing business without business tools.

Dig a little deeper. Check out the company. See what they have available for tools. See how much they are selling you these tools for. I would assert that if they’re selling these tools for a huge profit, it’s probably the wrong company to join. If the company is making more from selling business tools to their distributors than they do with the products, something is wrong.

The samples, catalogs, fliers, brochures, business cards, and websites should be priced inexpensively.  They have to be at an affordable price, almost at cost. I mean, if they’re selling you a DVD to prospect with for $30 or $40, and you know their cost to make it is $0.60, than something is wrong with that picture.

Finally, I truly believe the company should offer a FREE distributor website, free training calls, free webinars and low cost business cards and training tools.  There’s no need to charge you for these things.

# 5: The Distributor Agreement

The next thing you want to evaluate with your company is the distributor agreement. This is one area that a lot of distributors really neglect. They don’t even read the distributor agreement prior to joining. They just sign it and get started without knowing the company’s rules and policies.  This is a big mistake because a lot of companies have some clauses in their distributor agreement that are pretty bad.

A lot of companies have a no compete clause. In some cases, you can’t even own a second type of business when you’re a distributor.  You might want to look into that. A lot of companies also have rules about you selling products from other companies. Maybe you like to sell perfumes, maybe you sell a multivitamin, and maybe you’re with two or three different non-competitive type companies.   A lot of companies prohibit that.

In addition, a lot of companies also have policies that are NOT very internet friendly. For example, if you’re trying to build your network marketing business online, many companies prohibit you from making YouTube videos, writing blog posts, or even sending out emails that talk about the company.

Now, I understand all network marketing companies are going to have some rules in place to protect their intellectual property and to protect their reputation. That’s fine. Just make sure you read the distributor agreement before you sign up, so you know what you’re getting yourself into.  You want to know what you can and can’t do.

I would even suggest hiring a lawyer for an hour or two to go over the agreement with you.  At a minimum, have a trusted friend or family member review it with you, just so you can have a second set of eyes looking at it.

Make a list of questions you have prior to getting started.  Make sure that you get answers to these questions before you join.  Be an educated network marketer!

# 6: The Start Up Costs

The next thing you want to look at in a company is the startup cost. I believe in today’s world, no network marketing business should cost more than a $100 to start.  There’s thousands of MLM companies to choose from, and having to spend $500 or more just to get started just isn’t right (as I see it).

You shouldn’t have to buy a $100 to $500 starter kit just to qualify for certain bonuses and commissions either.  Ideally, the sign up cost should be FREE or low cost and the only thing you should be buying is PRODUCTS for personal use and to share with others.

I know some people won’t agree with what I just said, but there’s no reason you should have to spend a lot of money to get started with a network marketing company, not in today’s world.

I think the lower the start-up cost, the better.  Let’s face it; most of your prospects don’t have several hundred or several thousand dollars to start a part-time network marketing business.  Even if they are interested in joining, a high start up cost will make you lose a lot of great prospects. 

Besides, getting a large commission just for selling someone a $500 start-up kit is unethical in my opinion.

# 7: The Compensation Plan

The next thing you want to look at is the company’s compensation plan.  You must realize that not all compensation plans are created equal.  You want to see how many levels you get paid on, how much you get paid on each level, whether you must be on auto-ship to qualify for a bonus, if there are rules that make you lose your downline, etc.

Another part of the compensation plan you want to look at is what the wholesale-retail markup on the products is! Most MLM Companies offer two ways to earn money. There’s the recruiting of other distributors into the business and earning fast start bonuses and residuals from your team, and then there’s also the retailing aspect.

A lot of people don’t look at the retailing aspect of the compensation plan, but I believe that’s a very important part of the compensation plan.  You want to know what the mark-up is between your cost and the customer cost.  Ideally, I think anything above a 25% markup is more than fair, and 40 to 50 percent is even better.

This allows you to make an immediate profit in your business by sharing the products with others. Sponsoring should be a byproduct of retailing. I am a big believer in the retail to recruit method.

Please know there are LOTS of different types of compensation plans.  The most common are binary, uni-level, breakaway, and forced matrix.  I’m not going to tell you that one is better than the other, but I prefer the uni-level plans myself.  That’s what most of the big, established companies use.

# 8: The Company’s Financials 

The next thing to evaluate a MLM Company is the company’s financial statements. Here are a few things to look for:

  • Does the company have strong financial backing?
  • Will the company be around in 10 or 20 years?
  • Is it a debt-free company?
  • Is it a publicly traded company?
  • Is there money put away for future growth?

You might not be able to get the answer to every one of these questions, but find out what you can.  Studying the financials is pretty important.

I’ve always been a big fan of privately held companies over publicly traded companies.  I believe that most of the publicly traded companies are more interested in the stock holders than the distributors.   On the other hand, publicly traded MLM Companies must report their financial information each year, whereas privately owned companies do not have to do that.  Whether you pick a privately held or publicly traded company, make sure you do your due diligence and study the financials a little bit.

Companies fail for a variety of reasons.  In almost every case, it boils down to money, or lack of money.  You don’t want to partner up with a company, only to have it go bankrupt a few years later.

# 9: Company Leadership

The next thing to evaluate is the company leadership team. Learn what you can about the owners of the company, the President or the CEO, the Chairman of the Board, etc.  Whoever is running the company, they need to be distributor friendly.

Ideally, you want to have leaders who have previous experience as a distributor themselves, because what happens with a lot of these companies is they get a CEO or a new person in charge who’s never been a distributor before, and they change all the rules and all the policies and the compensation plan.  In the end, the distributor gets screwed.

You want a company that is very distributor friendly, with strong leadership, that has distributor experience, and they put the distributors first.  Without distributors, there would be no company for them to lead or manage.

Once again, a lot of companies in the network marketing world really mess this up. Make sure the company has a leadership team in place that is distributor friendly. I understand leadership changes from time to time and you don’t really have any control over that, but do your due diligence for now and learn what you can about the leaders, and make sure that they are distributor friendly.

# 10: Retailing vs. Recruiting

The next thing that I really look for in a MLM Company is the retailing versus recruiting. This is another one of those areas that very few people ever talk about. If your business only talks about recruiting distributors, I would tell you to run the other direction, and run fast.

If the only people in your business using the products are the distributors, I would tell you to run the other direction because you’re probably part of something illegal, or something that’s borderline illegal.

In all network marketing businesses, there should be more customers than there are distributors. There should be a huge focus on everyone getting customers by selling the product. Once again, most companies simply tell their people, “Consume the product yourself and recruit people.” Not only is that illegal, that is really shady. You don’t want to do that.

You want a company where everyone is taught to get customers, and preferably lots of customers in addition to building a team. For every distributor on your team, you want to have five or 10 customers, and you want your new distributors to have five or 10 customers, too. If people outside of the business are not using the products, get ready to eat a big lunch and get ready to potentially have your company be in trouble with the FTC one day.

Once again, you want a product-based company that focuses on getting customers in addition to team building. Most companies do not talk about this aspect of the business, and I think that’s a shame. If you study the top 10 biggest companies in our industry, they’re all retailing-based, and there’s a reason for that. That’s why they stick around for the long haul, and that’s why they turn into really big companies.  Without customers there is no business.

# 11: Better Business Bureau and Direct Selling Association Membership

This one isn’t a show stopper, but I do suggest you look for companies that are affiliated with the Better Business Bureau and Direct Selling Association.  Membership in these organizations does not mean the company is good, BUT most good companies seek out membership in these types of organizations.  If nothing else, it gives your company a little more credibility with others.

# 12: International Markets

Let’s face it; we live in a global economy.  Your network marketing company should do business in multiple markets.  The more countries your company does business in, the better.  You want to be able to sponsor people in different countries and build a global team.  If your company only does business in one country you are really limiting yourself.  It doesn’t mean an opportunity is bad if it is in only one country, but if I had to choose between two different companies, and everything else was equal, I would pick the company that does business in multiple countries.

Final Thoughts

In conclusion, these are the 12 things I look for when I’m evaluating a MLM company. Make sure that you set aside some time to objectively evaluate your business opportunity, just like you would if you were starting a traditional business.  Dig deep.  Evaluate each one of these 12 areas.  The company doesn’t have to score high in every single category, but make sure it passes the common sense test!

What are your thoughts?  Leave a comment below to let me know what you think. I look forward to hearing from you.

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chuck holmes

Chuck Holmes
Phone: (352) 503-4816 EST (my office)

9 thoughts on “How to Evaluate a MLM Company: Find the Right Company to Join”

  1. Wise counsel…This is a good manual for anybody intending to delve into online business.I hail from Kenya and that is why the bit on the internationality ,besides the other considerations,of a company is vital.

  2. MLM Gateway - Helping network marketers build their business
  3. Your advice here is next to perfect. Chuck’s wisdom at its finest!

    So many new network marketers do not study any of these things before jumping into a MLM opportunity. I must say that I have also done the same. I remember when a boss I had back in St Louis was involved with FHTM and was so hyped about it. He promised me riches upon riches and I studied nothing but his BS. Well FHTM went down the tubes and took a large investment of mine with it. If I would have studied everything you showed here, I would have never joined. This post should be mandatory reading for anyone considering a MLM business.

  4. MLM Gateway - Helping network marketers build their business
  5. Looking at a company’s track record is a very wise decision. No matter how wonderful the products are, if a company has a history of poor business, sales, or reviews then chances are it isn’t a smart idea to get involved with them. Often times people like to take those who introduce them to a company at their word without doing any evaluation for themselves. What others deem as a successful or healthy company may not match your standards and you don’t want to set yourself up for failure.

  6. MLM Gateway - Helping network marketers build their business
  7. It’s basic business principles that many multi-level marketers forget- supply and demand. Even if a company has the best compensation plan, lowest initial investment or even a great product, you will not be successful if there isn’t a market need. Also, it’s complicated so many marketers gloss over it but people need to pay attention to #8 on your list and check out the company’s financials. A strong company has the infrastructure to build strong teams.

  8. MLM Gateway - Helping network marketers build their business
  9. I think that many people who join the MLM world look for “the number one” MLM to join. Instead, they should be following the advice that you give here in your blog: do your homework. Look at the leadership, the compensation plans, and the start-up costs, because those are all very practical considerations. But after you have ruled out the worst, then pick an MLM that you can get behind the products and believe in. Otherwise, you will not succeed. What is best for someone else may very well not be the best for you.

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